Brunswick battered by economy, riding out recession

(Crain's) -- Brunswick Corp. has been navigating its roughest seas in more than a century and does not see calm sailing ahead.

The Lake Forest-based maker of boats and other recreational equipment has laid off 10,000 workers, leaving 18,000 total. It has shuttered 14 of its 28 boat plants worldwide; 10 of those closings are permanent.

"Our company has faced more adversity than perhaps at any time in its long and storied history," Chairman and CEO Dustan McCoy told shareholders at the 164-year-old company's annual meeting Wednesday. "We're not planning for 2009 to bring any meaningful economic recovery."

Brunswick's sales plummeted 45% in the first quarter to $734.7 million, and it endured a loss of $184.2 million, or $2.08 per diluted share, compared with a year-earlier profit of $13.3 million, or 21 cents a share.

Hayley Wolff, an analyst with Rochdale Securities LLC in Stamford, Conn., who follows Brunswick closely, forecasts U.S. industry sales of about 130,000 boats this year, down 24% from 2008's total and down 58% from the industry's 2004 peak.

Mr. McCoy raised eyebrows recently when he admitted he didn't expect boat sales to return to 2004 levels again "within my working career."

The company's other divisions are suffering, too. The fitness unit, which makes equipment for health clubs, saw first-quarter sales fall 21% to about $150 million. Bowling and billiards was down 12% to $100 million.

Still, Brunswick appears to be in a good position to ride the wave when the recovery does arrive.

It is sitting on nearly $360 million in cash and has access to another $272 million in a revolving credit facility. "The company has shown an impressive ability to conserve cash," Ms. Wolff said. And it has cut production below its current sales rate, which should help reduce inventories at marine dealerships.

The consensus among analysts is that Brunswick will lose $4 a share this year. Nevertheless, the stock has been on a tear, trading Wednesday near $7 a share, up from an earlier low below $2. Ms. Wolff believes that value-driven investors are betting on a turnaround in the economy, though she believes that a Brunswick rebound isn't likely before 2011.

"Brunswick has had compelling snap-backs in sales in the past when the economy turns positive," said Ms. Wolff, who rates the stock "neutral" for now.

One shareholder asked Mr. McCoy if Brunswick has reached the bottom of its market.

"We're getting close to the bottom," he said. "If we're not already at the bottom, we're very close."